Which of the following will cause movement along the reserve demand schedule?
A)a change in the price level
B)a change in real GDP
C)a change in tax rates
D)a change in interest rates

Question

Which of the following will cause movement along the reserve demand schedule?
A)a change in the price level 
B)a change in real GDP 
C)a change in tax rates 
D)a change in interest rates

Quizplus · Accepted Answer

A change in interest rates will cause movement along the reserve demand schedule. This is because interest rates affect the quantity of reserves that banks demand. When interest rates increase, banks demand fewer reserves, and when interest rates decrease, banks demand more reserves. Therefore, a change in interest rates will shift the reserve demand curve, causing movement along the schedule. Changes in the price level, real GDP, and tax rates will not directly affect reserve demand.

Which of the Following Will Cause Movement Along the Reserve